Romania Leu Jumps to 3-Month High as Bond Yields Tumble

The leu strengthened to the strongest level since January versus the euro after the nation sold debt at record-low yields in a bond sale yesterday.

The leu extended its stretch of gains against the euro into a third day, rising 0.1 percent to 4.35 per euro by 3:35 p.m. in Bucharest, the strongest level since Jan. 18, based on closing prices. Romania’s currency has gained 2.2 percent versus the euro this year.

The Finance Ministry sold 300 million lei ($89 million) of notes due 2016 at an average yield of 4.9 percent, down from 5.49 percent for similar-maturity debt auctioned March 7. It was one of three bonds added to JPMorgan Chase & Co.’s emerging-market debt index March 1, and bids of 1.2 billion lei were four times what was for sale, according to the central bank.

“We expect the leu to strengthen in the coming days, driven by the current strong trend in domestic debt,” Mihai Tantaru, a Bucharest-based economist at ING Bank Romania SA, wrote in a note today.

The leu is posting the best performance among eight eastern European and African currencies tracked by Bloomberg in 2013.

“The good result of yesterday’s bond tender, coupled with further dips in domestic debt yields to new all-time lows suggest foreign players offered support for the leu yesterday,” Tantaru said.

Yields on government leu-denominated bonds due 2017 dropped 21 basis points, or 0.21 percentage point, to an all-time low of 4.92 percent today, according to prices compiled by Bloomberg.